London mayor Sadiq Khan has published two important documents designed to increase the number of new homes built in the capital that are, in his pointedly chosen words, “genuinely affordable” to Londoners on low and middle incomes. One is his Affordable Homes Programme covering the next four-and-a-half years, which sets out how the minimum £3.15bn being dispensed to him by the government during that time will be spent. The other is his draft Supplementary Planning Guidance (SPG) aimed at streamlining the process for getting new homes built and pushing up the proportion of them that meet that “genuinely affordable” definition. Both should help the supply of such homes under Mayor Khan outstrip that achieved under Boris Johnson.

The paradox of writing about housing issues in London is that they concern basic human needs and deep human feelings while the business of addressing them involves arid technical terms and terrifying maths. Try to keep thinking of people with very little money living in cramped and insecure conditions, or “priced out” teachers, nurses, cooks and even solicitors as I endeavour to explain why the two new documents matter and how the mayor’s housing policy experts think they will help.

Affordable Homes Programme

The £3.15bn is to help fund 90,000 new homes, the construction of all of which must at least have started by March 2021. From scratch, it typically takes a couple of years to get one finished. The mayor’s agreement with the government is that nearly all the new homes will be one of three of Khan’s principal “genuinely affordable” types. A minimum of 58,500 of them will be either Shared Ownership or London Living Rent dwellings, 29,000 will be for Affordable Rent and there might be some other types of properties which, in small numbers, could also qualify for support under the programme.

So, what are those three kinds of “genuinely affordable” home? Shared Ownership has become a familiar option in London for people who will, to be blunt, never be poor enough to qualify for council or housing association social housing yet have neither the deposit nor the income to get a mortgage as first time buyers on the London open market. Shared Ownership means they can purchase a percentage of a property from a housing association, and pay rent on the remainder. They have the option of increasing the size of the share they own. The right shared ownership deal can be less expensive than private sector renting. Some buyers of shared ownership homes have found themselves hit with heavy service charges they weren’t expecting, so providers benefiting from Khan’s programme are being asked to draw up a charter for governing those.

London Living Rent is to be a new form of “genuinely affordable” home for working households from the “intermediate” part of the increasingly cluttered “affordable” spectrum. Rent levels will be at a discount rate based on one-third of the average household income in the boroughs where the homes are built. During the mayoral election campaign, Khan spoke in general terms about London Living Rent levels being low enough to enable tenants to save for a deposit to buy a place of their own. That link is to be formalised for London Living Rent homes built with financial support from the mayor, with providers of the homes expected to “actively support” tenants into home ownership within ten years and give them the right to buy a share of the home they have been renting. Just as shared ownership is seen as providing a first step into home ownership, these are seen as first steps into shared ownership.

Controversy has surrounded Affordable Rent since its introduction by the Conservative-Liberal Democrat coalition as part of slashing its grants to housing associations. Officially, it is a form of social housing and is allocated to people eligible for it, but its rents can be as high as 80% of those charged by local private landlords - far higher than traditional social rent and very far indeed from “genuinely affordable” in many parts of London, as Khan’s policy recognises. That said, Affordable Rent can be worthy of the name. Such properties let at 50% of local rates can be very adjacent to traditional social rent levels and in (relatively) inexpensive parts of the capital aren’t shockingly high. Khan will contribute to the building of Affordable Rent homes that conform to benchmark levels to be published.

Most of the homes funded from the Affordable Homes Programme will be provided by developers whose output across the capital comprises a minimum of 50% affordable homes - that basically means housing associations - and there will be what is described at City Hall as “a strategic relationship” with a small number of big providers who manage 60% or more. Responding to the wishes of the industry, Khan’s team has produced set levels for the grants they will distribute: £60,000 for Affordable Rent homes; £28,000 for London Living Rent or Shared Ownership.

Who will get to live in these new “genuinely affordable” homes? Shared Ownership in London has had its critics. In expensive areas, households with incomes of up to £90,000 a year can qualify for it - yes, it’s absurd - though more typical buyers are on less than half of that - the London median is about £40,000, which is close to the median London household income, and the deposits needed are on average something over £13,000, depending on the area. London Living Rent will be available for renting households making up to £60,000 a year. Affordable Rent homes will be allocated on the basis of need, mostly from council waiting lists. It’s worth keeping in mind that tenants can apply for housing benefit.

Supplementary Planning Guidance

The draft SPG is a separate but related part of Khan’s housing policy approach. It aims to help maximise the number of “genuinely affordable” homes generated through development schemes agreed between London and property developers of whatever type and size. Formally, it is to ensure the greatest effectiveness of policies in Boris Johnson’s London Plan, which Khan must abide by until he’s able to publish his own London Plan, a laborious enterprise that will take at least two years (there should be a draft by the end of next year). Effectively, the SPG seeks to put a bit of backbone into the relevant part of what Khan has inherited from his predecessor. This states only that the “maximum reasonable” affordable housing should be secured. Language could hardly be looser.

The 50-page document creates incentives for boroughs and developers to ensure that housing schemes they negotiate reach a threshold of 35% “genuinely affordable” homes per site without needing public subsidy. If they do, Khan, who has powers to block or even take over planning applications if he’s unhappy with what they offer, will look kindly on them. If they don’t he will set his team of number crunchers on those responsible.

At the heart of the draft SPG is the vexed question of viability. It has become standard practice for developers to set out the financial workings of their proposed schemes in viability assessments, which include their arguments for the amount of affordable housing they can afford to include. These are often denounced as opaque, ad hoc, secretive funny number exercises in befuddling hard-pressed council officers into accepting less affordable housing than the developer could, in truth, stump up and still make a healthy profit.

The draft SPG encourages a standardisation of the information that viability assessments should include and the methodology that should be used, including crucial stuff about how and when the value of land - a defining financial element - should be inserted into the complex viability equation (have a go at paragraph 3.36 if think you’re hard enough). It says that the mayor won’t even ask developers for viability assessments if their proposals reach the 35% threshold.

This is a part of a sort of trade-off, because viability haggling is fraught, expensive and time-consuming for developers too. The mayor’s team, having had numerous discussions with major players from all parts of London’s housing sector over the past six months, are satisfied that this simplification of the planning system at the mayor’s end of it gives developers and boroughs some welcome clarity and certainty.

So much for carrot. The stick? If a scheme falls short of the 35% threshold or wants some of Khan’s affordable housing budget in order to reach it, the mayor’s team will, by contrast, want to see very detailed viability calculations which, except in exceptional cases, will be “scrutinised and treated transparently”. A bit like having your iffy maths homework marked in public. Must try harder, and so. Further, such schemes will be subject to “comprehensive review mechanisms”, which means that their viability will be looked at again as they start taking shape, possibly resulting in the “affordable” homes percentage being bumped up.

Why 35%? The document describes this level as “ambitious and practical” and “informed by analysis of past completions and approvals” and places it in the context of just 13% of homes given planning permission in London during 2014-15 meeting the (less stringent) definition of “affordable” Johnson used. It also stresses that boroughs whose own local targets are higher than 35% are entirely free to keep at it. There is also a section on Build To Rent housing developments, which have their own, distinctive economics.

You can read the draft SPG here. The consultation period ends on 28 February 2017.

What difference will the two documents make?

The homes Khan wants to fund won’t be the only “affordable” ones built in London during the his mayoral term, which will end in May 2020, and beyond it. The larger housing associations, obliged by government grant cuts and to some extent put off by the complexity of bidding for mayoral funds under Johnson, have been become adept at exploiting London’s inflated property market to become more self-sufficient, building properties for lucrative market sale and using the profits to finance lower cost homes, including on separate sites. A number of London councils have set up their own semi-detached housing delivery companies, enabling them to borrow to build homes their residents can afford.

However, the mayor’s interventions in London’s housing market with the powers, the influence and the money he has could be very significant. Boris Johnson left office claiming he had overseen the building of a record 100,000 “affordable” homes in total over two four-year terms. Khan intends to help fund 90,000 over just four-and-half years under a stricter definition of “affordable”. Those are 90,000 starts, not necessarily completions, but let’s do some long division and call that an average of 20,000 starts a year over the four-and-half years to the end of March 2021. It certainly looks more impressive at this stage and getting more money from a Tory government than the Tory Johnson did must count as a success.

There is, though, a bigger picture to consider too. London’s overall housing need is generally held to be about 50,000 new homes a year. Khan acknowledged this in his manifesto, though he did not pledge to meet it. He has set no overall absolute target for delivering (or starting) “genuinely affordable” or any other kind of home by the end of his City Hall term. In fairness, it would be difficult to do set one that was really rigorous at this stage, given the vagaries of the property market, especially in the light of Brexit. But he will surely have to at some stage. Another part of that bigger picture, still unclear at this stage, is the future impact in London of the extension of right to buy to housing association tenants and forced sale of council housing stock demanded by the Housing and Planning Act.

One target Khan has set - a “long-term strategic one”, as he and his housing deputy James Murray emphasise frequently - is for 50% of all new homes in London to meet his definition of “genuinely affordable” in the capital, be that what he is now calling London Shared Ownership, London Affordable Rent, London Living Rent, traditional social rent or anything else that fits the definition. You don’t have to be all that clever at maths to know that 35% is less than 50% and that reaching an overall London 50% will require plenty of housing schemes that provide more than 50%. But here’s another way to look at it: total new housing output in London has been at around the 25,000 per annum level in recent years. Imagine if it stayed that low until 2021 and Khan’s 20,000 “genuinely affordable” homes were still built during that time. You do the percentages.

Meanwhile in the real world, one thing looks pretty clear. It is that Khan and his team have set about their housing task with the same energy and pragmatism that carried the mayor to power. The Affordable Homes Programme and the draft SPG have been welcomed by organisations as varied as Shelter, developer Mount Anvil, David Montague who chairs the G15 group of London’s largest housing associations and business organisation London First. This seems to bode well. But keep your abacus handy.